How Do You Start A Business Without Venture Capital Funding?

Answer from Sam McAfee, Product Development Coach and Author of “start-up Patterns: How Great Start-up Teams Work”

Entrepreneurs need to be realistic and deadly serious about the obstacles of starting a business without access to funding. Here in San Francisco, there are thousands of founders running around with both good and bad ideas. They are all trying to get traction, funding and talent. It's a bloodbath. And most of them, no matter how good their idea is, will not make it. That’s not because they didn't try, but, rather, because they're too stubborn to listen to those who have been through this process.

I talk to people like this literally every day. Yes, you need to have an internal drive and passion. Good entrepreneurs already have those qualities or they wouldn't even think of being an entrepreneur.

I am on my sixth start-up and I have coached about two dozen other founders over the last 15 years. The biggest problem I see with these founders is not a lack of passion or internal motivation. It is that most of them don't listen to and learn from the experiences of others. They have people cheerleading them all over the place about "following your dreams" and "you can do it.” That’s all great. But rarely are enough people asking them if they’ve validated their ideas with data.

It’s all too common for founders to keep pushing an idea long after they should have pivoted to the next one. This phenomenon is far more prevalent than the one of entrepreneurs quitting too early on the one "big idea" because they didn't push hard enough. Sure, the latter statement is a risk, but the former is much more harmful to entrepreneurs.

Here are three key challenges that entrepreneurs encounter and advice on how to overcome them:

Execution is Hard. Very hard.

Ideas are easy. Execution is hard. Entrepreneurs need to make sure that the problem they’re solving is one they’re passionate about and will want to spend the next 10 years trying to solve — mostly without a salary.

Traction is King

Getting lots of users is incredibly, almost prohibitively, difficult. I have seen many start-ups with extremely compelling value propositions struggle to gain traction. What you need is a clear reason why users will come on-board in the first place. It's not going to be "to get deals," and it's not going to be "blah blah with friends". You need something more than that to cut through the noise of a million apps and websites.

Think About Monetization for Saas business

The monetization model of promoting deals by subscription is going to be hard without a sales team. But you can't hire a sales team without revenue. You have a classic market chicken/egg problem here. The user base, assuming you can get one, is probably going to have to be enough to attract sales people. There are too many easier and cheaper channels for businesses to access.

You also need peers who you can bounce your ideas off of — peers who aren't just a bunch of us graying consultants. You should absolutely prioritize attending meetups with product and start-up people. Pull together a team of co-conspirators and see what ideas you can come up with.